Freedom of Choice in Health Care Act in West Virginia

Recently, legislators in West Virginia filed, HJR 103, that state’s version of the Freedom of Choice in Health Care Act. It says, among other things:

(1) A law or rule may not compel directly or indirectly any person, employer or healthcare provider to participate in any healthcare system.

(2) A person or employer may pay directly for lawful healthcare services and may not be required to pay penalties or fines for paying directly for lawful healthcare services. A healthcare provider may accept direct pavement for lawful healthcare services and may not be required to pay penalties or fines for accepting direct payment from a person or employer for lawful healthcare services.

(3) Subject to reasonable and necessary rules that do not substantially limit a person’s options, the purchase or sale of health insurance in private healthcare systems may not be prohibited by law or rule.

The Rich Get Richer: Senate’s Medicaid Proposal Gives Bigger Bailout to Wealthier States

People were rightly upset when they learned about the “Cornhusker Kickback,” the deal whereby Sen. Ben Nelson of Nebraska sold his vote in favor of the Senate’s health bill in exchange for his state never having to pay for any of the Medicaid expansion in the bill.

However, the biggest problem with the Medicaid expansion in the Senate health bill is not the “Cornhusker Kickback,” but that it leverages an already flawed formula to determine federal payments to state Medicaid programs. The Senate bill would motivate states to invest more resources in recruiting higher-income residents into Medicaid, rather than traditionally eligible beneficiaries, including the blind and disabled. The Senate bill also gives richer states a bigger Medicaid bailout than lower income ones. New Hampshire, Maryland, and Connecticut get the biggest handouts, while Mississippi, West Virginia, and Arkansas are short-changed, according to my just published analysis.

The Federal Medical Assistance Percentage (FMAP) is the federal financing formula that encourages each state to spend its own taxpayers’ money irresponsibly in order to maximize its take from other states. For example, California’s FMAP was traditionally the 50 percent minimum: For every dollar California spent, the U.S. Treasury would kick in one dollar. However, the FMAP is supposed to give more federal dollars to states with more poor people. So, Mississippi has had the highest FMAP, 75.67 percent: For every dollar Mississippi spent on Medicare, the U.S. Treasury would kick in $3.11.

The Senate bill proposes a much higher FMAP, averaging 90% nationwide, in 2019. However, the higher FMAP would only apply to the relatively higher-income, able-bodied, newly eligible, beneficiaries. People eligible under the current law will still draw the previous FMAP. States with FMAPs of 50 percent would see them increased to 82.3 percent for the newly eligible beneficiaries. Imagine yourself a county public-health bureaucrat who would attract one federal dollar for every dollar spent on a blind or disabled Medicaid beneficiary, or $4.65 for every dollar spent on an able-bodied young man. Obviously, you would invest your energy in recruiting the able-bodied youth.

Furthermore, the expanded FMAP gives more federal fiscal leverage to rich states: Each thousand-dollar increase in money income per capita is associated with a one-percent increase in the FMAP under the Senate bill, and this statistically significant regression explains over one-third of the variance in the change in FMAP.

For example, New Hampshire’s money income is $68,175 per capita, which is $16,942 greater than the national average of $51,233. Its FMAP would increase from 50 percent to 82.3 percent, an increase of 65 percent. This is 18 percent greater than it would have been if higher per capita incomes did not explain the Senate’s “generosity.” On the other hand, Mississippi’s FMAP increases by only 20 percent: From the current 74.73 percent to 95 percent. This increase is 15 percent less than it would have been if the state’s low income did not explain its poor outcome in the Senate’s FMAP allocation.

Instead of leveraging the FMAP, Medicaid reform should jettison it entirely, in favor of easily understood block grants.

Existing Programs Unused

Lost in the controversy of the various health reform bills is the fact that there are already public programs out there that aren’t being fully used. Medicaid is one, as a certain portion of the uninsured (I forget the number) are eligible for Medicaid but haven’t signed up.

Another public program going unused is West Virginia Rx. According to one report, only 6% of the eligible population is using it. The program gives free medications to people with incomes that are 200% of the federal poverty level or less. They can’t, however, be enrolled in a government insurance program such as Medicare or Medicaid.

Will West Virginia, Facing Medicaid Crunch, Spend More?

“West Virginia officials are predicting deficits in the Medicaid program of $95 million in fiscal year 2013 and another $169 million in 2014 unless the economy improves and enrollment goes down.” So says the Charleston Daily Mail.

So what do some people in the state call for? Putting more people in Medicaid! The state is living off an increase in the federal match, but that’s temporary–and expanding the rolls is likely to be permanent.

Some people say that expanding Medicaid will actually save money. But the reverse is more likely true: Medicaid increases prices for private-pay patients. (The same is true of Medicare, which typically pays more than Medicaid.)

Federal Funds are the Crack Cocaine of Health Care Policy

Federal funds help state officials expand public programs–woohoo, we can cover more uninsured!–but at a price. In brief, they are deep-discounted teasers. The feds offer, at worst, a 50/50 match. Should the state ever seek to restrain costs by pulling back that expansion, it also loses the federal matching fund. But because of the match, it has angered twice as much money as it would have otherwise.

I thought of all this when I read that West Virginia will get a $6.3 million grant to "support the expansion of health-care coverage for uninsured residents." In this case, the match is much higher (80%). So the state pays only 20% of the cost.

There's a catch. The grant is for five years. I'm guessing that after that point, West Virginia will have to pay 100%.Will the state have the money to take over the extra responsibility?

It sounds a bit like working at a minimum-wage job, taking out a large loan with a balloon payment after 5 years, and hoping that you'll be sitting in the corner office by then.

U.S. Index of Health Ownership 2nd Edition Is Here

Pacific Research Institute has published the 2nd edition of the U.S. Index of Health Ownership, the only ranking of health care in the states that uses criteria of individual choice.

Americans lack the basic freedom to make their own health care decisions. The Index measures the degree to which individuals, be they patients, health professionals, entrepreneurs, or taxpayers, “own” the health care in their states.

The lack of health ownership is a real problem. Almost half of the country’s health care spending is in the hands of the government, instead of patients themselves. The other half is governed by regulations inflicted upon doctors, health plans and patients.

The Index uses 24 variables to quantify how state laws and regulations affect the liberty of citizens involved in state government health plans (primarily Medicaid), the private health-insurance market, and the provision of medical services. It also assesses the effect of medical tort on people’s freedom to engage health services.

Alabama, Montana, Nebraska, North Dakota, and New Hampshire finished in the top five, as the states that allow their citizens the highest degree of health ownership. Alabama leads the pack primarily because of a lightly regulated private insurance market, and good control of state government programs. Also, the state performs well on medical tort indicators. Alabama’s regulatory environment for providers favors competition, and government health programs run more effectively than in most states.

New York, Massachusetts, Rhode Island, Vermont, and North Carolina rounded out the bottom five, as the states in which the government has taken the most undue control of health care from its citizens. This is the second year that New York was in last place. The state suffers from government health-care programs that are out of control, a grossly overregulated private-insurance market, and almost completely uncompetitive provider markets.

A full listing of all 50 states and their rankings is contained in the Index.

The Index will give concerned citizens a good basis to demand reforms from their state politicians that will put American families in charge of American health care, instead of government and special interests.

West Virginia Governor: Let’s Put this Expansion on Hold

Thanks to an infusion of federal matching funds, West Virginia has a surplus of $237 million in its Medicaid program.

What should the state do? The governor and some members of the Legislature have, not surprisingly, different ideas.

Sen. Roman Prezioso and Del. Don Perdue would like to spend the money. Perdue said, "We'll see a lot of money left over in Medicaid this year and next year. We felt the state would be wise to use a little of that money now."

But Gov. Joe Manchin is reluctant, warning against expanding the programs during uncertain times: ""Do you build the base this year and then tell them in two years the program has to be cut because the money's gone? That's cruel and unusual punishment."

We should see that sentiment more in our elected officials.

West Virginia Medicaid Option Panned

West Virginia offers people in Medicaid an option within the Mountain Health Choices plan, which gives people more benefits in exchange for pledges to take medicine as directed and do other specified tasks.

Families USA doesn't like the program, which in my mind means it can't be that bad after all. Now some researchers at West Virginia University give the plan some poor marks as well.

According to a news account about the WVU evaluation, "the report counted nearly 131,000 eligible recipients, close to 19,000 of whom participate in the advanced plan." That's a 15% takeup rate, which isn't great. On the other hand, it doesn't say how long the option has been around. It can take a while for public programs to change.

So what's the problem? "The report concluded that few eligible recipients enrolled in the enhanced plan because they did not understand the program."

Sounds like a problem with education rather than the plan itself.

Medicaid Expansion in West Virginia

While Medicaid and SCHIP extend well into the middle class in some states, that's not the case in West Virginia. But Gov. Joe Manchin would like increase the number of the state's residents in Medicaid.

Remarkably–maybe I'm used to high-spending states–the only people in West Virginia who qualify for Medicaid are adults of minor children, and even then the income limit for a family of four 35% of the federal poverty level of $22,050, which comes out to $7717. (The state's median household income in 2007 was $37,057.)

Manchin wants to include childless adults, ideally up to 100% of the federal poverty level. It's not clear whether that will happen.

The Fetish of Universal Coverage

West Virginia's governor, Joe Manchin, suggests that the state may waive some of the required benefits it imposes on on insurance policies.

That's the good news.

The bad news is that it's part of a fetish to expand the number of people with health insurance. Under ideas being kicked around in Charleston, insurance companies would be invited to come up with mini policies that cover some preventive services. But they wouldn't be have catastrophic coverage.

That's like buying a homeowner's policy that pays for a new coat of paint, but doesn't help you if your house burns down. In other words, prepaid services, not true insurance.